The Indian rupee fell 4 paise to an all-time low of 84.76 against the U.S. dollar in Tuesday’s trade. The drastic drop in the value of the rupee can be attributed to a number of factors. The primary reason among which is the threat that President-elect Donald Trump gave of imposing a 100 per cent tariff. He also said that he will be imposing harsh tariffs on the BRIC bloc of nations if they act to undermine the U.S. dollar.

Indian Rupee Demotion Reasons

The fall in the value of the rupee is also caused by the strengthening of the dollar. President-elect Trump winning the US general elections has resulted in the dollar performing strongly. This coupled with Trump’s threatening of imposing 100 percent tariffs on all 9 BRICS member countries. The Tariffs are subject to a decision of the BRICS to launch an alternative to the dollar. Simmering geopolitical tension has led to China devaluing its own currency, Yuan. These tensions have led to market volatility.

Secondly, India’s GDP growth slowdown has also impacted the fall in the value of the rupee. GDP growth of India slowed to a near two-year low of 5.4% in the July-September quarter. This has resulted in the poor performance of the manufacturing and mining sectors. Following this, several brokerages have lowered their FY25 real GDP growth estimates. Whereas others have suggested that monetary and fiscal support is required to boost growth towards 6.5% YoY. Alongside this, RBI action to ease liquidity sooner is also needed if not rate cuts.

The fall in the value was also caused by an increase in the value of crude oil barrels. The price of oil barrels rose by nearly 1 per cent to $72.6 a barrel in the market. Additionally, a dip in the forex reserves in the previous weeks resulted in the fall of rupee value.

Official Statements

Meanwhile, Minister of State for Finance Pankaj Chaudhary, on Monday, said in Parliament that the rupee remains one of the best-performing Asian currencies. This was despite geopolitical tensions in the Middle East and other headwinds. Indicating India’s sound economic fundamentals. One of the main reasons for the depreciation of INR has been the broad-based strength of the USD, he said.

“During CY 2024, Dollar Index has increased by about 4.8% till November 19, 2024. More recently, the Dollar Index touched 108.07 on November 22, 2024, its highest in more than a year. This was exerting pressure on emerging market currencies,” he further added.

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